A pivotal unemployment report

The unemployment report for the month of August will be published today. The expectations are not good, with many doubts on the survey methodology they follow, since big adjustments have been made to prior numbers, all of them signaling a clear deterioration of the labor market. In the chart below, you can see that for the first time since April 2021, there are more unemployed people than job openings. And that’s counting the impact of lower immigration. The real question is if the number will be bad enough to allow the data dependent Fed to lower rates at the September FOMC meeting. If it is, inflation will take the back seat, and the Fed will need to focus on the full employment part of their mandate. If it isn’t, the clash between the White House and the Fed will continue. Alongside the legal battle surrounding tariffs, the unemployment report is crucial for the well being of the bond market, and may be the pivotal point for U.S. monetary policy.

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